Preface FEATURES. viii

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1 Preface FEATURES viii Operations management is an exciting and vital field in today s complex business world. Therefore, students in both MBA and undergraduate courses have an urgent need to understand operations an essential function in every business. This textbook on operations management addresses the impact of operations decisions on the firm and emphasizes cross-functional decision making with a supply chain orientation. The text provides materials of interest to general business students and operations management majors. By stressing cross-functional decision making, the text provides a unique and current business perspective for all students. This is the first text to incorporate cross-functional decision making in every chapter. A unified decision framework organizes the material by grouping decisions into four major categories: process, quality, capacity, and inventory. This framework is intended to make it easy for students to understand the decision role and responsibilities of operations in relation to functions such as marketing and finance. The text also provides a balanced treatment of both service and manufacturing firms. We continue to emphasize operations in the supply chain with a new section on supply chain risk, a separate chapter on supply chain management, and supply chain material in most chapters. The most current knowledge is incorporated, including global operations, supply chain management, e-operations, service blueprinting, competency-based strategy, Six Sigma, lean systems, and mass customization. Complete coverage is also provided on traditional topics, including process design, service systems, quality management, ERP, inventory control, and scheduling. While covering the concepts of operations management in 16 chapters, the book also provides 17 case studies. Included is a briefing case tied to the popular Littlefield Technologies simulation. The cases are intended to strengthen problem formulation skills and illustrate the concepts presented in the text. Long and short case studies are included. The cases are not just large problems or examples; rather, they are substantial management case studies, including some from the Ivey, Stanford, and Darden School case collections. This softcover edition with fewer pages than most introductory books is economical for students. It covers all the essentials students need to know about operations, leaving out only superfluous and tangential topics. By limiting the size of the book, we have condensed the material to the basics. This book is ideal for regular operations management courses and also case courses and modular courses. It is particularly useful for those who desire a crossfunctional and decision-making perspective that reaches across the supply chain. Instructors can easily supplement the text with their own cases, readings, or course materials as desired. The website for the text contains 21 Excel templates designed to assist in solving problems at the end of chapters and the case studies. The website also contains technical notes on linear programming, simulation, transportation method, and queuing, which can be assigned by the instructor, if desired. The website contains PowerPoint slides, video clips, chapter quizzes, and Web links to companies cited in the Student Internet Exercises in the text. The instructor s website is password protected and contains the instructor s manual with solutions for discussion questions, problems, and cases. It also contains a test bank of questions for developing

2 Preface ix ex cel exams. The website for this textbook ( is also linked to the McGraw-Hill operations website ( A number of pedagogical features are contained in this book. Operations Leader boxes are included in each chapter to illustrate current practices being implemented by leading firms. Each chapter contains at least three Student Internet Exercises. These exercises allow for extended learning about concepts discussed in the chapter. Points of cross-functional emphasis are noted in each chapter by a special symbol a handshake. This highlights the locations of cross-functional aspects of operations decisions. Solved problems are included at the end of quantitative chapters to provide additional examples for students. Excel spreadsheets are keyed to specific problems at the end of chapters. One of these spreadsheets is illustrated in the text for each chapter that contains Excel problems. The student textbook website can be used to extend students learning of the basic ideas covered in the text. It includes technical chapters, video clips, Excel templates, PowerPoint slides, chapter quizzes, and Web links. Appropriate video clips are noted in the text margin by a special symbol and identification label. KEY CHANGES IN THE SIXTH EDITION 1. Bringing in the latest knowledge This is the first operations and supply chain textbook to bring in cutting edge research findings. The book covers the idea that not all the latest practices such as Six Sigma and Lean fit all organizations. This is the contingency approach to fitting the structure of the organization to its internal and external environment. For example, a firm that is not capable of ISO9000 certification is not ready for Six Sigma or a Baldrige Award. We also bring in knowledge of behavioral operations management as it affects the bullwhip effect in supply chains and forecasting decisions. 2. Major chapter changes Chapter 1 maintains a focus on how operations and supply chain decisions fit within the functional areas of organizations and within their broader external environment. A new model of operations and supply chain fit within the organization and the external environment captures these concepts. The chapter also introduces the contingency approach that is used throughout the book to improve student understanding of when certain tools and concepts are or are not the best approach. The latest knowledge from published research provides the foundation for explaining how the contingency approach is used to understand the limits of best practices. Chapter 2 is completely reorganized to present a more logical flow of material beginning with the definition of operations strategy and then expanding the discussion to supply chain strategy, global operations, and environmental concerns. A new section on distinctive competence is added. Chapter 3 illustrates how Dell uses modular design for computers to provide variety. The battery development process for the Chevy Volt is described. Research shows that concurrent engineering should be avoided in

3 x Preface projects with high uncertainty (e.g., unfamiliar product, market, or technology) since it decreases project performance. This result indicates that best practices are often not universal in nature, but are contingent on the situation at hand. Chapter 4 now discusses mass customization at New Balance Shoes to provide custom shoes in five days. Recent studies show that cross-functional integration is a key enabler of mass customization. By itself mass customization does not increase performance, but also requires integration. Chapter 5 has revised the service guarantee content and added research to show that service guarantees lead to increased customer satisfaction. Customers are then more likely to engage in repurchase behavior and to recommend the services provided to their friends. Chapter 6 has been resequenced so that flowcharting or process mapping is now presented before process analysis. A number of examples have been added to the discussion of the process view of the firm, including addressing the cross-functional and interorganizational nature of the process view. Chapter 7 now has all topics organized around the five tenets that are the driving principles of lean thinking. This includes discussing instances in which these principles are applied in novel ways and in unexpected industries. For example, the chapter explains set-ups in service industries and how lean thinking can be applied in instances where stabilization of the master schedule may not be feasible. A variety of service industry examples have been added to illustrate such applications. Chapter 8 resequences the content in a substantive manner. This chapter progresses from understanding of quality products, services, supply chain to the benefits of quality management before discussing quality pioneers and specific forms of quality management. Also included is new material related to the cost of quality and research on how ISO 9000 certification helps to increase firm survival, sales, and employment, while reducing work-related injuries. Chapter 9 clarifies the confusion between process statistical control and process capability. While statistical control is important for process capability assessment, a process that is in a state of statistical control and whether or not a process is capable are two separate issues. Chapter 10 includes a new section on supply chain resilience and risk. We also show how to calculate total cost of ownership for outsourcing purposes. The bullwhip discussion is modified by adding research that shows how human behavior amplifies the bullwhip effect. Chapter 11 includes a new visual illustration to compare real demand against various exponential smoothing models. We report the current use of forecasting methods in U.S. firms. Also added is recent behavioral insight on how forecasters react to high and low variability in demand, and include advice on best forecasting techniques in each situation. Chapter 12 added an illustration of how BMW does strategic capacity planning via mixed integer programming. Chapter 13 includes new manufacturing and service examples from a variety of industries. We also discuss recent research on how focused investments in cross-training can add flexibility to the scheduling of operations.

4 Preface xi Chapter 14 clarifies definitions of project management terms. A new example of project management from Churchill Downs, Kentucky, is added. Chapter 15 includes a new section on vendor managed inventory (VMI) and research on how much inventory is carried by various supply chain partners. Chapter 16 clarifies the parts explosion process of an MRP system and adds research on the difficulties of implementing an ERP system successfully. 3. Many Operations Leader boxes have been added or revised to include global and service examples, including 3M Canada, Apple iphone, Autozone, BMW, Boeing, Brazilian Football Confederation, Cantaloupe Systems, Chevy Volt, Ford, Dell, Harrah s Cherokee Casino & Hotel, JustERP, Millken & Company, Montgomery County Public Schools, New Balance, Physician s Clinic of Iowa, Starbucks, TRW, Target Corporation, The Villages (of Florida), U.S. Environmental Protection Agency, Vanderbilt-Ingram Cancer Center, and West Marine. 4. Seventeen case studies are provided including two Stanford cases, three Ivey cases, and one Darden case. Existing cases have been revised to add current information. Five new cases are added: Operations Strategy at Galanz Paediatric Orthopaedic Clinic at Children s Hospital of Western Ontario The Mount Rundle Hotel Banff Unsafe for Children: Mattel s Toy Recall and Supply Chain Management Pyrex In this edition we include Managing a Short Product Life Cycle, a briefing case tied to the Littlefield Technologies simulation. This case can be easily assigned to students in preparation for them to play the simulation. 5. Supply chain management continues to be emphasized with a separate chapter, a section on supply chain risk, and supply chain material in most chapters. BOOK SUPPLEMENTS Book supplements available to instructors include the instructor s manual, Power- Point slides, Excel templates, additional video clips, an image library of text exhibits, and a computerized test bank. These materials are all available on the instructor s website. McGraw-Hill/Irwin video series is available to book adopters. These videos include 17 volumes containing over 45 segments varying in length from 9 to 25 minutes. The videos provide actual plant and service tours, and students can hear from real operations managers. The topics include concepts such as lean production, Six Sigma, manufacturing processes, CIM, inventory management, services, supply chain management, layout improvements, supplier development, value-driven production, scheduling, product and process design, international logistics, project management, and green manufacturing. McGraw-Hill/Irwin has the following product available for purchase or shrinkwrapped with the text at a discounted price: Why ERP: A Primer on SAP Implementation, by Jacobs and Whybark.

5 xii Preface ACKNOWLEDGMENTS The authors would like to acknowledge the many individuals who have assisted with this book. Special thanks go to the reviewers for this edition: Cheryl Dale William Carey University Steven Dickstein The Ohio State University Farzaneh Fazel Illinois State University Lynda Fuller Wilmington University Mark Goudreau Johnson & Wales University Xiaowen Huang Miami University of Ohio Kimberly Hurns Washtenaw Community College Kazimierz Kleindienst California State University Fullerton James Patterson Western Illinois University Quad Cities James Rand Seattle Pacific University Raj Selladurai Indiana University NW The authors would also like to thank the staff at McGraw-Hill/Irwin who had a direct hand in the editing and production of the text. We would also like to thank our colleagues at the University of Minnesota who listened to our ideas and provided suggestions for book improvement. Additional thanks go to Doug and Letty Chard, who diligently and carefully prepared the index. Finally, we thank our families for their patience and perseverance during the many months of writing and editing. Without their support and encouragement this textbook would not have been possible. Roger G. Schroeder Susan Meyer Goldstein M. Johnny Rungtusanatham